and had the former Hard Rock Park assign the right to trademark the park’s ride and attractions to H.R.P. Creative Services. According to a business article published yesterday in TheSunNews.com:
“The former CEO of Hard Rock Park is asking the park’s new owners, who purchased the property out of bankruptcy last month, for an annual $500, 000 licensing fee and royalties, according to documents filed in federal bankruptcy court in Delaware. Steven Goodwin, the former CEO, said in an e-mail to the park’s new owners, FPI MB Entertainment, that the park is still the intellectual property of a corporation he formed. He is asking for 1.5 percent of the park’s revenues above $50 million, according to court documents.”
Based on the fact that the current owner of the former Hard Rock Park, FPT/MB Entertainment LLC, has filed a Motion to Enforce the Sale Order in bankruptcy court, I assume that this transfer of rights may have caught the new owners off-guard.
It’s a fact that just because the Seller is willing to sell doesn’t mean all the critical vendors are part of the package. A useful precaution for the buyer is to ask to view and photo copy all the leases and contracts critical to operating the business such as phone, garbage, cleaning, hauling, major vending lines, office equipment, intellectual property, computer system, warranties, heating/cooling and electricity. You analyze and break down each agreement, contract and lease and find out exactly what the Seller has committed to in its business. Sometimes a critical vendor may have a “no assignment” clause written into the contract that will need to be negotiated before the purchase. You also pull all financing liens and other public filings made by the Seller to find out if there may exist a conflict on ownership of inventory, equipment or assets.
H.R.P. Creative may well be arguing today that it owns the Trademark for the name “Bohemian Rhapsody™, ” for example, and has the right to license this Trademark to others. This right is separate from and has no relationship to the physical operation of the park, its rides or attractions but if the park wants to use these Trademark names in the park, it needs to license the use of these Trademarks. These Trademarks do not encumber the physical assets of the park.
I imagine FPT/MB Entertainment will implore the bankruptcy court that the names of the facilities and rides are material terms of the Purchase contract. A contract that the court itself confirmed. FPR/MB Entertainment bought the park through bankruptcy free and clear of all liens and encumbrances, including the encumbrance of the Trademark names. They may also argue that it is grossly unfair that the former CEO knew that the names for all the rides and attractions were assigned to a company in which he had an interest and did not disclose this fact to anyone until after the sale completed. They will ask the court to stop the former CEO from unfairly profiting from his silence or his lack of cooperation. Another possible argument, though less convincing, would be to claim that even if the former CEO has the Trademark to these names, that he abandoned the trademarks when he allowed the park to file bankruptcy.
It will be interesting to find out what happens today, but no matter what the court decides, this situation provides us all a great example that when purchasing any ride or used piece of equipment for our business, make sure you have all the facts about the ownership and history of the ride or equipment before you sign on the dotted line.
And more from Greg Van Gompel: